Pick n Pay has two more years to phase out its exclusive leases as the anchor tenant in malls than Shoprite and Checkers, who feel the disparity is unfair.
On Thursday, the Shoprite group asked the Competition Tribunal, which acts like a court on competition matters, to modify its voluntary agreement on exclusive leases.
The saga began at the end of 2015, when the Competition Commission began a four-year grocery retail market inquiry investigating whether there were factors that distorted competition in the sector.
The commission found in more than 70% of the 2,000 shopping centres it examined there existed exclusive leases. These are agreements between the mall owner and an anchor tenant such as Pick n Pay that exclude a direct competitor like Checkers or Spar from setting up in the same centre. Some of these leases were for as long as 20-40 years.
The commission concluded such exclusive leases keep out direct competition, reduce consumer choice and stop small businesses and historically disadvantaged entrepreneurs from participating in the economy.
The grocery market inquiry recommended an end to exclusive leases. It said the commission should ensure voluntary compliance with their recommendation or develop legislation to enforce it.
The commission entered discussions with retailers to come to co-operative agreements, which were then made into binding orders by the tribunal.
Shoprite was the first to enter such an agreement and must cease enforcing exclusive leases in malls where one of its brands is the only grocery retailer, from December 17 2024.
Pick n Pay was next, but reached different terms and has until December 2026 to phase out all exclusive leases.
Aggrieved, Shoprite believes it was penalised for being the first to enter an agreement with the commission.
It now wants to change its agreement to one similar to that of Pick n Pay. The commission opposed its application at the tribunal on Thursday.
Shoprite advocate Margaretha Engelbrecht told the tribunal: “The thrust is that the Pick n Pay is insulated from competition by Shoprite until 2026.”
Engelbrecht said the purpose behind ending exclusive leases was to allow smaller retailers and historically disadvantaged stores to open in the same shopping centres, not to protect Pick n Pay from Checkers.
“It is not for the commission to benefit one national supermarket competitor over another."
The commission said in papers Pick n Pay was smaller and less profitable than Shoprite.
Shoprite earned more than R187bn in revenue its 2022 financial year ended July 3, with profit of more than R8bn before tax.
Pick n Pay’s revenue amounted to R97bn in the year to February 27 2022 with profit before tax exceeding R1.8bn.
Engelbrecht said Pick n Pay’s turnover and profit could “hardly lead to the conclusion it is a small or struggling competitor” that the inquiry needed to protect.
Judgment was reserved.
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